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Piper Jaffray Downgrades Illumina Stock

NEW YORK (GenomeWeb News) – Investment bank Piper Jaffray has downgraded Illumina to Neutral from Overweight and also has cut its price target on the stock.

Senior Research Analyst William Quirk said in a note published today that the "downgrade reflects concerns over increasingly more challenging 2H13 comps, likely limiting upside in the back half of the year, and with the current valuation."

He said that although he believes the second quarter is "trending favorably … we believe further upside in 2H13 will be more modest." However, he also noted that Illumina is best positioned among the next-generation sequencing players, and Piper Jaffray's diligence suggests it will continue to gain share from its installed base and customers considering new purchases.

The bank also adjusted its revenue and earnings-per-share estimates for Illumina for FY 2013 and 2014, reflecting an increased diluted share count, a pulling forward of approximately $14 million of HiSeq 2500 upgrade expectations from 2014 to 2013, and a trimmed forecast for revenue associated with Verinata.

Piper Jaffray now expects FY 2013 revenue of $1.35 billion, up from a previous estimate of $1.34 billion, with EPS of $1.65 versus a previous estimate of $1.67. For FY 2014, it expects Illumina to post revenues of $1.51 billion, down from a previous estimate of $1.55 billion, with EPS of $1.91, compared to a previous estimate of $1.96.

Based on these new estimates, Piper Jaffray has placed a $70 price target on Illumina's stock, down from a previous target of $72.

In Tuesday afternoon trade on the Nasdaq, shares of Illumina were down around 4 percent at $73.45. It hit a 52-week high of $77.14 yesterday.

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